SEEDRS
Industry/sector: Venture capital
Founded: 2009
Founders: Jeff Lynn, Carlos Silva
Chief legal officer: Karen Kerrigan
Based: London
Seedrs began as an MBA project at Oxford’s Saïd Business School before launching in 2012. In May that year it raised £1.3m in funding and received authorisation to become the first regulated equity crowdfunding platform in the world. Like Crowdcube, its model is based on bringing crowd investors and entrepreneurs together to invest in start-ups. It has now funded over 350 companies and helped to invest over £130m through campaigns on its platform.
Seedrs claims to have trebled its turnover in successive years from 2013 to 2015, passing a number of milestones along the way. In May 2014, it facilitated its first co-investment, raising almost £300,000 for safe messaging app Maily. Four months later it launched the world’s first equity crowdfunding campaign for a publicly-listed company, raising over £4m for UK wine and beer company Chapel Down.
In August 2015, Seedrs saw its valuation rise to £30m following a £10m Series A co-fundraising led by renowned fund manager Neil Woodford and Augmentum Capital. That same year it launched in the US following Jumpstart Our Business Startups (JOBS) Act equity crowdfunding approval, helping Seedrs to build on its 2014 acquisition of California-based Junction Investments. In July 2016, Seedrs was granted an EU Financial Services Passport and opened an office in Amsterdam. It also became the first equity crowdfunder to publish results on the performance of its investment portfolio, helping investors to understand likely returns across a range of sectors. It closed 2016 by posting its strongest numbers so far, investing more than £85m into new campaigns, an increase of nearly 25% on 2015.
‘Seedrs is a good example of what the UK market can achieve.’
It has also funded a number of companies that are now recognised as among the most promising start-ups in the UK by the prestigious Real Business Everline Future 50 list. These include high-end online jewellery business Rare Pink, subscription shaving service Shavekit, and global streaming platform We Are Colony. In 2016, it raised more than £2m for challenger bank Tandem and helped the UK’s fastest growing peer-to-peer lender Landbay, now partnered with Zoopla, to raise £1.6m.
Co-founder and chief executive Jeff Lynn, who began his career as a corporate lawyer working at Sullivan & Cromwell’s offices in London and New York, certainly knows the importance of legal advice. In 2013 he appointed former Simmons & Simmons partner Karen Kerrigan (pictured) as Seedrs’ legal and financial director. Kerrigan has been the company’s chief legal officer since 2015. According to one private practice nominator, Kerrigan has been ‘very busy dealing with new regulations and [overseeing] a fast-growing business with complex legal issues. As an individual she is very impressive and Seedrs is a very exciting business and a good example of what the UK market can achieve.’
Kerrigan is a well-known figure in the UK fintech space and has helped to raise the profile of the industry via the UK Crowdfunding Association.
MONZO
Industry/sector: Alternative finance
Date founded: 2015
Founder: Tom Blomfield
Head of compliance: Dean Nash
Based: London
Monzo was only granted a restricted banking licence by UK regulators in August 2016 and is still not operating as a fully-fledged financial services business, but it has already become the UK’s most popular mobile-only bank, signing up over 100,000 users for its pre-paid card services while attracting a large following on social media.
Founder Tom Blomfield is a big name in the fintech community. The former Oxford University law student had previously co-founded direct debit provider GoCardless, which he exited in 2013 before going on to serve as chief technology officer at rival challenger bank Starling. Blomfield founded Monzo – originally known as Modo – in February 2015. A year later it was authorised to hold customers’ money and issue pre-paid Monzo-branded MasterCards, which must be topped up by bank transfer. However, UK regulators have shown they are prepared to back successful new financial services businesses, and Monzo expects to begin offering a wider range of banking services in the first half of 2017.
‘Any lawyer brave enough to work in start-ups will learn more in a year than in three years elsewhere.’
In the meantime, Monzo has concentrated on developing app-based features not offered by traditional banks, including a notification service to help manage monthly budgets. In November 2016, Monzo hired ex-Barclays’ lead legal counsel for client and customer experience Dean Nash as its head of compliance.
Nash himself was cited by one admirer in our research: ‘Any lawyer who is brave enough to go and work in [start-ups] will learn more in a year than he would in three years elsewhere, while grappling with some very interesting legal issues.’
ATOM BANK
Industry/sector: Alternative finance
Launched: 2015
Founder: Anthony Thomson
Head of legal: Laura Farnworth
Based: Durham
As Atom Bank’s founder and chair Anthony Thomson has put it, opening a bank with branches these days would be like a telecoms company installing phone boxes. Atom was both the UK’s first digital-only bank and the first UK bank without branches to be granted a licence when it was authorised in June 2015 by the Prudential Regulation Authority. It was recognised in KPMG’s 2015 Fintech 100 as one of the top ten companies using technology to drive innovation globally within the financial services industry.
The first in a wave of digital-only challenger banks in the UK, Atom has since been joined by a number of others, including Monzo, Starling and Tandem, along with Clydesdale Bank’s digital-offering, B, and Virgin Money. However, Atom is not simply looking to operate a traditional bank with lower overheads. It has no call centres or interactive websites and its app-only model offers a number of unique features. In 2016, Atom signed up with Xerox-owned customer services specialist WDS to introduce Virtual Agent, a machine learning and analytics platform that allows customers to interact with Atom’s app in increasingly sophisticated ways, and Agent IQ, software that works with Atom’s behind-the-scenes team of online helpers to come up with real-time solutions to difficult problems.
It is also backed by some marquee investors, including fund manager Neil Woodford, former Goldman Sachs economist Jim O’Neill and Spanish bank BBVA. Atom’s senior leadership also has a deep experience of operating challenger banks. Founder Thomson helped set up Metro Bank, the UK’s first new high-street bank in over a century when it launched in 2010, and is chair of the financial services forum. Atom’s chief executive, Mark Mullen, was previously chief executive of First Direct, the telephone banking arm of HSBC, and head of HSBC’s UK contact centres.
The bank has already attracted over £100m in deposits to its savings platform, offering a return of 2%, and has started to expand its offering. In December 2016, Atom started offering residential mortgages through independent mortgage advisers, making it the first solely digital bank to do so. It will soon partner with high street banks, allowing customers to deposit cheques and cash into their accounts. It is expected to complete a fresh £100m funding round in the first half of 2017.
Industry/sector: Venture capital
Founded: 2011
Founders: Darren Westlake, Luke Lang
General counsel: Paul Massey
Based: Exeter
Founded in 2011, Crowdcube is the world’s first equity crowdfunding platform. It brings venture capitalists (VCs) and retail investors (the crowd) together to invest in businesses and is an increasingly important source of finance to UK small and medium-sized businesses. Crowdcube is among the strongest-performing UK fintech businesses. To date, it has invested over £210m into over 400 businesses, with close to £100m of that raised in 2016.
Those numbers may look small in comparison to more established investment platforms, but according to Beauhurst, a leading provider of data on the UK’s private high-growth companies, equity crowdfunding is now the second most active funder type in the UK after private equity. Crowdcube was the single most prolific equity investor in 2015, representing 5% of the total investments made in the UK.
Crowdcube not only established a platform for VCs and individuals to co-invest, it proved the model could work when it completed its own crowdfunding co-investment in 2014. Paul Massey joined Crowdcube as general counsel in early 2014, shortly before Balderton Capital invested £3.8m into the company alongside crowd investors as part of a £5m round.
Massey was closely involved in negotiating the terms of the fundraising entirely structured around bringing a top-tier VC together with the crowd. He describes the transaction as ‘highly unusual at the time but the kind of deal that Crowdcube now executes routinely. We work with companies’ legal advisers to structure fundraises so that companies can take on a large crowd of investors without running into administrative problems. We work to ensure the crowd is treated fairly when investing alongside VCs. I don’t always go in for gimmicky corporate values, but a Crowdcube value is to “be the crowd” and the Crowdcube legal team live by that’.
Just as significantly, Crowdcube has seen the first successful exits from its portfolio, demonstrating that a large crowd of investors should not deter buyers. The July 2015 sale of E-Car Club to Europcar – the world’s first successful crowdfunding exit – validated Crowdcube’s business model and gave investors returns of three times their original investment. This was followed by the sale of Camden Town Brewery to AB InBev in December 2015, once again giving investors positive returns.
In the growing equity crowdfunding space, Crowdcube’s main UK competitors are Seedrs and Syndicate Room, but according to data from Beauhurst, Crowdcube facilitated more deals in the first half of 2016 than both combined. There are also a number of equity crowdfunding platforms in the US, including crowdfunding pioneer Indiegogo, which recently moved into the space. The complexities of US regulations (particularly the JOBS Act) means that pure-form equity crowdfunding has not reached the same scale as in the UK, but it is an area Crowdcube is intent on exploring. However, with the UK alternative finance market worth an estimated £5bn, there is still plenty of room for it to expand domestically.
Perspectives: Paul Massey, general counsel, Crowdcube?
‘I am proud of finding new ways to communicate legal information so everyone understands what share rights are on offer.’
Paul Massey joined Crowdcube in early 2014 as the company’s first lawyer and 16th recruit overall. He now leads a team of six – including one lawyer based at Crowdcube’s Spanish subsidiary – while the company itself has grown to nearly 100 employees. While his role covers every aspect of the company’s operations, his primary contribution to Crowdcube – and crowdfunding more generally – has been finding new, legally-compliant ways for disparate groups of investors to work together.
‘Different levels of sophistication among retail and institutional investors can present a challenge,’ says Massey. ‘We need to make sure no-one is disadvantaged by the co-funding model, but the standard legal documents are not a particularly good way of reaching such a diverse investor pool. Finding new ways to communicate legal information so that everyone understands exactly what share rights are on offer is one of the things I am most proud of.’
As a director of both the UK Crowdfunding Association and the European Crowdfunding Network, Massey has been active in educating regulators on co-funding and pushing new ways of communicating risk more suited to digital platforms. He has also been petitioning for a change to the EU Prospectus Directive. Massey comments: ‘Pretty much any company that raises more than €5m is obliged to issue a prospectus under European law, but the prospectus regime was designed for the paper world and doesn’t work particularly well for digital businesses or their investors.’ The rise of crowdfunding has also made the €5m threshold problematic. ‘Crowdcube has already helped more than 50 companies raise over £1m, and as more start-ups reach the prospectus threshold the difficulties of drafting a common document for institutional investors and crowdfunders are becoming more apparent. It is also very expensive for small companies to go through the process. Lawyers’ and accountants’ fees will typically come in at well over £100,000, and if you’re a small business raising €5m then that’s a big burden.’
The EU has since confirmed that it will raise the prospectus threshold to €8m, with the new limits set to be introduced in early 2018. This, says Massey, reflects a wider recognition of the UK fintech market and its success. ‘European regulators accept to a certain extent that what goes on here can be applied more broadly. I spent a lot of time in Brussels explaining how the crowdfunding system works. The UK’s approach to regulating it is a shining example of what can be done and a lot of EU regulators now share that view.’
Massey trained at Norton Rose and spent time at Wragge & Co and K&L Gates. He moved in-house to work at Sega in 2010 before joining eBay as senior legal counsel later that year. Massey’s background in commercial law meant he had to immerse himself in financial regulations after joining Crowdcube, but his role goes far beyond that of a GC working in the traditional financial services sector. ‘We are an FCA-regulated business and I act as our head of compliance, which means monitoring regulations and overseeing our regulated financial promotion is a big part of my job, but legal tends to be a broad function at fintech businesses. My role covers structuring investments, running investor due diligence, looking at share rights to helping to devise new products.’
Industry/sector: Fintech
Founded: 2011
Founders: Tom Blomfield, Matt Robinson, Hiroki Takeuchi
Head of legal: Ahmed Badr
GoCardless specialises in making bank-to-bank payment methods like direct debit available to a wider pool of users. It was founded in January 2011 by ex-McKinsey consultants Matt Robinson (pictured) and Hiroki Takeuchi along with fellow Oxford University alumnus Tom Blomfield, who has since gone on to found challenger bank Monzo, and received its first funding six months later from California-based seed accelerator Y Combinator.
To date, GoCardless has raised more than $25m in funding, including a $13m investment secured in early 2016 from Notion Capital, along with existing investors including Passion Capital (the venture capital firm at which Eileen Burbidge, the UK’s special envoy of fintech, is a partner). It is now handling over $1.5bn worth of transactions and has over 25,000 companies registered on its platform.
The core of GoCardless’ technology is an API that allows it to integrate quickly with other payment systems, including the direct debit platform, allowing users to access bank-to-bank payments in two minutes. As Ahmed Badr, head of legal at GoCardless, describes it: ‘The essence of our offering is stripping away the complexity of direct debit to create a usable, modern equivalent. Small businesses can approach a bank and ask to be registered with the system, but the bank will ask for the company’s trading history for the past three years and insist it has £200,000 on account. And good luck integrating a small business with a system built in the 1970s and designed for use by large corporates. It was a market ripe for disruption.’
While GoCardless still welcomes small and medium-sized enterprises of all sizes, its model has since evolved and it is now targeting larger corporate customers. TripAdvisor, Thomas Cook, Guardian Media Group, Virgin and HM Government are among its publicly disclosed customers. It is also working with other rapid growth companies that have not developed a bank-to-bank payment platform. In 2015, GoCardless expanded its offering to cover other European payments systems via the Single Euro Payments Area, moving it a step closer to the vision of creating a new global payments network. Recognised as the fastest-growing company in the fintech sector of the 2016 Deloitte Fast 50 and the second-fastest growing company overall, the London-based company has expanded its operations to France, Germany, Spain, Sweden and the Netherlands.
Its major competitors include Amsterdam-based multichannel payment company Adyen and US web-payments platform Stripe, though major card providers could present a more serious challenge if they were to refine their model. However, a number of nominators have tipped GoCardless to continue its steady growth, including Uber’s Matt Wilson.
Perspectives: Ahmed Badr, head of legal, GoCardless
‘After three months in the job, the CEO said he didn’t know how they’d managed without a GC.’
In 2015, GoCardless was advised to bring in its first in-house lawyer. Its board was not sold on the idea. ‘I was essentially told “we don’t need a lawyer, why are we hiring you?”‘ recalls Ahmed Bard, now head of legal at the online payments company. ‘It’s a valid question if you’ve not worked with an in-house lawyer before. The company wanted to know what in-house lawyers actually do. After three months in the job, the CEO came up to me and said he didn’t know how they’d managed to cope without a GC!’
Badr’s background in corporate law also made him a somewhat atypical hire for a Financial Conduct Authority (FCA)-regulated company. ‘While I had done banking work and was familiar with a range of financial products, I had no regulatory background, which certainly looks like a disadvantage in this role. However, in contrast to mainstream financial businesses, fintechs usually target a relatively niche area and you don’t need to understand the entire field. I’m pretty clued up on payments regulations now; grasping the fundamentals of the business is where you really add value.’
In Badr’s view, employing in-house counsel is even more important in the growth phase of a company. ‘A lot of GCs will say that their job is to make their job unnecessary, and that is particularly true in a company that hasn’t developed rigid ways of doing things over many years. I don’t want the sales team to ask me the same question on every deal. Being GC at a young company gives you a fantastic opportunity to get things right first time.’
Before moving to GoCardless, Badr was a corporate lawyer in Microsoft’s UK team. The experience of working at a global business was, he says, hugely beneficial to his current role. ‘GoCardless is now looking to work with larger customers, which means that a feel for enterprise-level deals and the legal machinery needed for them to run smoothly is very important. Obviously, when you have a sophisticated organisation on the other side of the table you need to have the right conversations. A lot of my job is helping them understand our model and feel comfortable with us as a provider.’
One important aspect of Badr’s role is monitoring regulatory developments. With the opening of APIs to third-party competitors, GoCardless may have to review its business model, but, says Badr, the chances of wholesale change in the bank-to-bank payments system is minimal. ‘Our API is a core part of what we offer, but if we saw this as our sole competitive advantage we would not last long. Fintech businesses are founded on ease of use and customer experience as much as technology. Also, it is difficult to convey just how complicated the direct debit system is and how much effort is required to make all the various pieces fit together once you start interacting with it. Banks are unlikely to spend the time and money refining their approach to a system that forms a very small piece of their overall business. We are the recognised direct debit experts in the market and you need to specialise in it to get the required economies of scale.’
Brexit and the loss of passporting rights would present a more pressing risk, and GoCardless is among the many UK-based fintechs carefully examining its options. However, says Badr, the fact that it has been FCA-authorised for the last five years will give it a big advantage in applying for European financial services passports. ‘The FCA is still seen as one of the most trustworthy regulators globally, and that is a big door-opener in Europe. Brexit does not call into question the FCA’s probity and high standing across the eurozone, and we hope that European regulators will see that what works in the UK can work elsewhere.’
LENDINVEST
Industry/sector: Proptech
Founded: 2013
Founders: Christian Faes, Ian Thomas
Head of legal: Ruth Pearson
Based: London
In a country dominated by its property market, mortgage lending should be an attractive proposition for challenger companies. LendInvest was incubated out of Montello Bridging Finance as an independent entity in 2013 as the first peer-to-peer lender focusing on property lending anywhere in the world. It is now the largest dedicated peer-to-peer property lender globally and the fourth largest peer-to-peer lender of any kind in the UK, where it accounts for around 10% of all UK peer-to-peer lending by volume.
LendInvest uses an online platform to match individual and institutional investors with established property buyers looking for mortgage finance. Unusually for a peer-to-peer platform, loans are secured against the value of the asset. Since it was launched, LendInvest has originated over £800m of loans to landlords and developers for terms lasting one month to three years, making it one of the most active short-to-medium term mortgage lenders in the UK. It is authorised and regulated by the Financial Conduct Authority and is the only online lender to have been rated twice by a regulated European credit rating agency.
LendInvest is one of the most active short-to-medium term mortgage lenders in the UK.
The company’s chief executive and co-founder Christian Faes (pictured) – a former Clifford Chance lawyer who was briefly in-house counsel at Deutsche Bank – believes LendInvest can eventually become the UK’s largest mortgage lender. It is already widely tipped to be the county’s next unicorn tech company and has posted impressive results over the last two years. In early 2015, it secured a £17m investment from Skype-founder Niklas Zennström’s venture capital firm Atomico. This was followed by a £22m investment from Chinese technology company Beijing Kunlun, the largest-ever Series A round funding in the UK fintech sector. By the end of 2015, following just two years of trading, the company had lent nearly £500m to property entrepreneurs, reported its second consecutive year of profits, doubled its headcount to over 70 full-time employees and moved to new premises in Fitzrovia.
Last financial year, LendInvest again performed strongly, lending £320m and growing revenues to £32m, a 133% increase on 2015. Profits also rose to £3.4m in 2016, a slight increase from £3.3m in 2015 but a notable one in the face of significantly higher staff costs and post-Brexit uncertainty in the UK’s property market. LendInvest’s financial success has been even more impressive in the context of the fintech sector. It is by some measure the only UK-based fintech to have posted profits in successive years. It has also maintained its 0% capital loss record – no LendInvest investor has ever lost money – and continues to offer among the highest annual returns in the peer-to-peer mortgage sector.
In early 2016, LendInvest appointed Ruth Pearson, ex-managing associate in Simmons & Simmons’ banking team, as general counsel (and its first in-house lawyer). According to one former Simmons colleague, Pearson has managed to ‘get up to speed with what is a very complex business [while] dealing with issues ranging from employment to litigation, IP and some very technical banking and finance and regulatory work.’ She now oversees a team of three lawyers, working with the company’s compliance department. Before joining LendInvest, Pearson spent eight years in private practice.
Industry/sector: Peer-to-peer lending
Founded: 2010
Founders: Samir Desai, James Meekings, Andrew Mullinger
Head of legal: Lucy Vernall (Global GC), Martin Cook (UK GC)
Based: London
Stretching our definition of companies of the future, Funding Circle has largely already arrived. The peer-to-peer lender is among the biggest and highest profile fintech businesses in the UK, if not Europe at the moment. To date, it has lent over £2bn to UK businesses through its financial matchmaking service, which allows investors to either select companies individually or have their investment spread around Funding Circle portfolio automatically.
Funding Circle is the only UK online lender to have its loans securitised and the only UK peer-to-peer lender to have floated an investment fund, the Funding Circle SME Income Fund, which allows investors to purchase shares in the London Stock Exchange-listed platform rather than invest directly into individual businesses.
In 2015, it secured a £100m investment led by DST Global, one of the largest venture capital deals ever in the UK. In January 2017 it finalised a further £82m in funding led by venture capital group Accel. It has already been valued at over $1bn, but posted a loss of £36.9m in 2015 on revenues of £31.9m. Like main UK competitors Zopa and RateSetter, Financial Conduct Authority-regulated Funding Circle will be hit hard if the UK loses financial passporting rights to the eurozone, but it will be in a strong position to deal with the turbulence. It launched in the US in 2013 and in 2015 acquired German company Zencap, helping it expand into Germany, Spain, and the Netherlands.
The company’s legal team – led by highly rated global general counsel Lucy Vernall (pictured) and UK general counsel Martin Cook – has also stood out as one of the best in the fintech sector. Angus McLean of Simmons & Simmons was among the many nominators to have been impressed by the legal team, noting its work on ‘sophisticated transactions that would normally be handled by big banks rather than a relatively small team at a start-up’.
KANTOX
Industry/sector: Foreign exchange
Launched: 2011
Founders: Philippe Gelis, Antonio Rami
Based: London, Barcelona
Currency exchange startup Kantox is an online marketplace where users can trade foreign currencies, business-to-business, at mid-market rates. Founded in 2011 by former Deloitte employee Philippe Gelis, Kantox is the first peer-to-peer marketplace to deal with foreign exchange hedging. Kantox displays live rates, along with its commission fees, and charges no extra fees for the spread or delivery. It seeks to offer a significantly better exchange rate than banks or brokers.
Since it was founded, an increasing number of fines levied against banks for opaque foreign exchange practices has validated Kantox’s business model and it has been recognised by a number of prestigious awards, including Finovate Europe and BBVA’s Open Talent award in 2013.
It has since attracted some notable backers: in 2015 it raised an $11m Series B round funding, which saw former Goldman Sachs partner Patrick de Nonneville placed on its board and notched up its largest-ever single trade – a $33.67m currency exchange. By the end of the year it had processed more than $1bn of transactions since launch. It is now close to processing $2bn worth of transactions and has increased its client base to around 2,000.
But it is the potential for growth in a global foreign exchange market worth $6trn a day that has excited investors, and Kantox is widely tipped to be among the fastest-growing and most valuable fintech companies in Europe. It will compete with fellow London-based companies TransferWise and TransferGo and has recently begun its search for a general counsel to help it move to the next level.
STARLING BANK
Industry/sector: Digital banking
Founded: 2015
Founders: Anne Boden, Mark Hipperson
Head of legal: Matt Newman
Based: London
Digital-only bank Starling is part of the recent wave of disrupter banks offering new ways for customers to manage their money. Rather than trying to compete with established banks, its model is built around a single product – current accounts with access to payment systems – supported by a number of online services.
Starling was set up by former Allied Irish Bank banker Anne Boden and briefly counted GoCardless founder Tom Blomfield as chief technology officer before he left amid controversy. In summer 2016, Blomfield’s replacement, Mark Hipperson, who was also the bank’s co-founder, also quit. In spite of these teething problems, Starling has been widely tipped as the challenger bank to watch by a number of senior law firm partners with extensive fintech practices.
‘Newman has hit the ground running and is already doing some great work.’
The bank received its licence from the Prudential Regulation Authority and the Financial Conduct Authority in July 2016 and launched to customers in January 2017. In early 2016, it secured $70m from Harald McPike, the founder of Bahamas-based Quantres, and added two Quantres directors to its board. By August 2016 Starling had become the first challenger bank to gain direct access to Faster Payments Service, a UK-based system that allows instant payments to be made between financial institutions.
Legal affairs are now overseen by Matt Newman, who joined as Starling’s general counsel and company secretary in December 2015 following nearly 20 years in private practice. Newman had previously been head of private equity at Thomas Eggar and a long-time adviser to Boden. Hogan Lovells fintech partner John Salmon says Newman ‘has hit the ground running and is already doing some great work. Starling itself is really interesting and, as with many of the banks in its space, has some very interesting tech-related issues for its lawyers to work through. [Newman] has shown how, by employing a very established finance lawyer, a start-up can avoid a lot of the bottlenecks faced by competitors.’
TRANSFERWISE
Industry/sector: Payments tech
Founded: 2011
Founders: Kristo Käärmann, Taavet Hinrikus
Head of legal: Jenifer Swallow
Based: London
Another alt finance standard-bearer, TransferWise started in 2011 as a reciprocal agreement between London-based Estonians Kristo Käärmann, a manager at Deloitte, and Taavet Hinrikus, Skype’s first employee outside its founding team. Each month, the two friends would swap euros and sterling to avoid bank charges. They developed the idea to build a crowd currency exchange and, in 2012, a Financial Conduct Authority-approved business.
TransferWise now has over a million users and handles around £800m in transfers over its platform every month, helping users to save around £1m a day on bank transfer charges. It now employs hundreds of staff across eight offices, making it one of the largest fintech businesses in the UK.
The company has attracted over $100m of investment since it was formed, including a $58m funding led by Silicon Valley venture capital house Andreessen Horowitz in early 2015, which saw PayPal founder Peter Thiel and Virgin founder Richard Branson join TransferWise as board members. Following a $26m top-up funding round led by Baillie Gifford in 2016, TransferWise was reportedly valued at over $1bn.
TransferWise has over a million users and handles £800m in transfers every month.
Such a high valuation has been questioned by analysts, but it is also clear that TransferWise is on a strong upward trajectory. In the year ending 31 March 2016, it posted revenues of £28m, growing around 180% of the previous year. Its strength in the global remittances market also gives it large potential for growth.
In 2015, TransferWise hired Jenifer Swallow as its first head of legal. The ex-Mind Candy general counsel has a history of advising fast-growth companies. She joined Zynga, creator of FarmVille, as UK-based senior international counsel in August 2011, just as it was preparing to launch its much publicised IPO in the US, and had previously served as EMEA legal compliance director at Yahoo!.
Industry/sector: Supply-chain financing
Launched: 2011
Founders: Anil Stocker, Ilya Kondrashov, Charles Delingpole
General counsel and company secretary: Simon Coles
Based: London and Manchester
MarketInvoice is an electronic marketplace that helps small businesses manage their cashflow by selling unpaid invoices at a discount. Launched in 2011, it was instantly recognised as a high-potential venture by a number of industry startup awards lists, including by City AM and Smarta. It is now the world’s largest peer-to-peer invoice finance platform and has started attracting the attention of private equity and venture capital funds.
Two of the company’s founders remain its senior executives, with Anil Stocker acting as chief executive and Ilya Kondrashov as chief operating officer and chief financial officer. Stocker, who started out in private equity, first with Lehman Brothers Private Equity Group, and subsequently Cogent Partners, is well known in the fintech world as part of the UK government-backed delivery panel, which helps shape national fintech policy.
In 2016, MarketInvoice secured a £7.2m investment led by Polish investors MCI, with the round marking the first European venture-backed fundraise for a UK fintech since the Brexit vote. It recently passed the milestone of having traded over £1bn in face value of invoices, providing funding to new businesses and is forecasted to pass £2bn by early 2018.
One of MarketInvoice’s main fintech competitors in the UK is online supply-chain financer Sancus BMS Group (formerly Platform Black), with both companies seeking to challenge bank-led invoice financing. According to general counsel Simon Coles (pictured), a big part of MarketInvoice’s offering is its ability to offer confidential loans with clear, up-front fees. ‘Banks are not transparent with their lending fees and their model is not suited to a lot of small to medium-sized businesses’, says Coles. ‘Combining ease of use with transparency is something banks have struggled with, which is why fintech companies like MarketInvoice have grown so rapidly.’
User-friendly service is not MarketInvoice’s only selling point. It also owns proprietary risk technology – an algorithm that assigns risk to various creditor and contract types – and an auto-bid function that allows investors to choose the types of risks they are prepared to accept and have their cash allocated automatically. This, says Coles, helps distinguish it from other peer-to-peer lenders. ‘Our product cycle is a lot shorter than competitors’ and we collect a lot of data on the market that can be used to inform risk pricing. Our model is helping small businesses overcome the problems that can be caused by their customers’ payment schedules.’
Former Fieldfisher partner Coles joined the company as general counsel in March 2016. A hugely experienced finance and restructuring lawyer, Coles does not conform to the image of an inexperienced hire in the tech scene. After training at Allen & Overy he spent nearly six years at Simmons & Simmons, two years at TLT, and one and a half years as a lecturer in law at BPP University Law School. He has also spent time in-house at The Royal Bank of Scotland. However, says Coles, this depth of experience makes a good fit at MarketInvoice.
‘Once you reach a certain size you need experienced people in there to get you to the next stage and form leadership teams. Having a solid background as a finance partner also helps you to build trust with larger institutional customers.’ More broadly, Coles helps the business with a range of issues, from designing new products to dealing with collections and enforcements.
Industry/sector: Money transfer
Founded: 2010
Founder: Ismail Ahmed
Head of legal: Sam Ross
Based: London
Revenue: £27m (2015)
Five billion people on earth live in households without access to a bank account. There are over seven billion mobile phone subscriptions globally. Put those two things together and it becomes obvious that money transfer by mobile phone can be a viable alternative to banking for much of the world’s population. Add in a remittances market estimated to be worth over $600bn a year globally and the case for a mobile-based money transfer platform becomes obvious.
WorldRemit was founded in 2010 when Somali-born Ismail Ahmed, then an MBA student at London Business School, became frustrated with the high fees charged by money transfer services. His mobile-first remittance platform was quickly recognised as a high-potential business and has since grown to be one of the market leaders, facilitating 400,000 transfers every month in over 50 countries.
In 2015, WorldRemit was named the UK’s fastest-growing technology company in the Deloitte Technology Fast 50. That same year it generated revenues of £27m – 80% growth on 2014 measured in sterling – to become one of the highest-earning fintech companies in Europe. In February 2016, WorldRemit raised $45m from Silicon Valley Bank and Triple Point to take its total funding to almost $200m since launch.
The London-headquartered company opened its US headquarters in Denver at the end of 2014 and is now active in more than 40 states across the country. It also has regional offices in Canada, Hong Kong, Australia and New Zealand, employing over 150 staff worldwide. In addition to building its presence in countries where large volumes of remittances originate from, it has also looked to work closely with banks and telecoms companies in countries that receive high volumes of payments. In 2014 it signed up with the two largest banks in the Philippines, BDO and Metro Bank, to allow for transfers over WorldRemit to be instantly deposited, and available for withdrawal, by the banks’ customers. It has also signed a number of deals with telecoms companies and mobile money operators to allow mobile numbers to be used as proxy bank accounts.
Offline money transfer operators such as Western Union or MoneyGram will see WorldRemit as a major competitor. Competition is also likely to come from social media companies integrating remittances services into their messenger apps. There are also a number of tech-based remittances providers offering a similar service, including Xoom, which was acquired by PayPal last year for $890m, and UK-based unicorn TransferWise.
WorldRemit recruited its first lawyer, Sam Ross (pictured), in February 2016. Ross became head of legal in December 2016 and is currently building WorldRemit’s first-ever legal team. Ross trained at Olswang in 2007 and joined Barclays as legal counsel and customer experience manager in 2012.
Industry/sector: e-payments
Founded: 2006
Founders: Philipp Nieland, Tobias Schreyer
Head of legal: John Fernandez
Based: London
Revenue: €31m
The proliferation of new payments providers – from PayPal to Apple Pay and more esoteric offerings like Bitcoin – mean retailers are facing growing costs to integrate the various payment systems while customers often find their preferred payment method unavailable. Cross-border payments company PPRO seeks to address this problem by aggregating existing payment systems and allows them to interact via a common API to form a single payment provider.
It now provides worldwide access to over 100 different alternative payment platforms and is the most successful aggregator of bank transfer payment methods in Europe. The Single Euro Payments Area, which allows for credit transfers and direct debits in the euro area, has created an even stronger incentive to standardise payments systems and handed a fresh advantage to PPRO, which already integrates with a number of alternative payment systems in Europe.
Unusually for fintech, PPRO predates the financial crisis, being formed in 2006 by Philip Nieland and Tobias Schreyer, who now serve as its chief strategy officer and chief commercial officer. Simon Black, the former head of Sage Pay, was appointed as chief executive in 2015. Originally based in Germany – where electronic payments have been slow to gain ground – PPRO is now headquartered in London. In 2012, PPRO was granted an e-money licence by the Financial Conduct Authority and began issuing its own prepaid MasterCards and Visa cards – including the VIABUY card – processed by UK-based fintech Global Processing Services. In 2016, PPRO delivered its millionth card, making it the most widely used alternative pre-pay card supplier in the world. It now employs around 120 people and has a number of offices throughout Europe.
A further distinguishing feature of PPRO is that its business is based on working with incumbents rather than disrupting the market. In 2015 it signed up with Alipay, the e-payment system owned by the world’s largest retailer, Alibaba Group, to handle payments for its AliExpress platform in Europe.
In the UK, PPRO’s legal affairs are led by John Fernandez, who acts as senior legal counsel and head of regulation. Fernandez is also chair of the Electronic Money Association, the industry body that represents Europe’s fintechs, e-money companies and payment service providers and counts PayPal, Worldpay and Google Payments among its membership.
Industry/sector: Cyber security
Founded: 2005
Founder: David Lanc
General counsel: Martin Nolan
Based: Edinburgh
Edinburgh-based cyber security start-up Payfont claims to have developed the world’s best protection against online fraud. The feedback it has been getting from industry observers suggests it may not be an exaggerated claim. In 2016, its personal authentication and data security technologies won Innovation of the Year at the Scottish Knowledge Exchange Awards. Payfont founder and chief executive, David Lanc, has a long record of developing security products. During his time as an executive director of The Royal Bank of Scotland’s cards business, Lanc helped bring chip-and-pin technology to the UK, and was a major contributor to subsequent global chip-and-pin standards. He was also the first UK payments executive to deploy 3D Secure tech for internet card security.
Originally incorporated in 2005, Payfont has been developing what it describes as a non-linear, dynamic generation of identity and data security, which makes data breach and identity theft all but statistically impossible. The crypto-fragmented data storage architecture Payfont has developed is a first-of-its-kind software that scrambles information so it can only be read with authentication. In an independent assessment in 2016, the company was valued at around £180m.
Former Burness Paull senior associate Martin Nolan (pictured) has been advising Payfont since 2012 and became its first general counsel in 2016. ‘I felt completely invested in the business and they knew me well, so it made sense to formalise the arrangement,’ says Nolan. ‘It’s the type of trusted relationship between lawyer and start-up that I expect to see more of in future.’ Managing disclosures and due diligence on the company and its intellectual property takes up a big part of Nolan’s time, although he increasingly finds himself working to build relationships with the wider Scottish business community and key stakeholders.
‘The technology we have developed is something the world is crying out for, and the willingness of Scottish entrepreneurs and business leaders to keep in touch and share ideas is really helpful in getting it out there.’ At the same time, says Nolan, the openness of the legal community has been important in refining aspects of Payfont’s commercial proposition. ‘Developments like the General Data Protection Regulation and the second payment services directive, together with other legislation, mean we can utilise regulatory change as a driver of our business. In this space, a sophisticated risk or compliance professional is just as valuable a source of ideas as many company directors.’